Why Automated Forex System Trading
Automated Forex System Trading
With the instability of many investments over the last 18 months, many people are turning to the Foreign Currency Market as an alternative, but why foreign currency investment instead of other securities?
The Online Forency Currency Trading or ‘Forex Trading’ possesses some unique characteristics:
- Its trading volume is vast compared to other markets.
- It possesses huge liquidity so buying and selling currency is never a problem.
- The market operates 24 hrs a day for almost 6 days per week.
- The Trading Floor is electronic, there is no ‘bricks and mortar’ exchange.
- There are 4 major markets, Asia, Europe, London & New York, offering the potential of 4 opening movements every 24 hrs.
- The market liquidity increases every year, irrespective of economic conditions.
- Since the early 90s it has been open to Retail Investors
Many small investors, like to trade part time and still maintain a full time job. This can pose problems since they are restricted to when they can monitor the charts. Yes you can trade on a ‘Blackberry’, but you gotta be good to work off a screen that small! Anyway, this has caused an explosion in automated Forex systems for trading, often referred to as Forex Robots. Many of these Forex Robots had their origins in trading houses, where there was a requirement to trade small investor accounts. They were also developed to produce entry and exit signals for professional traders.
Tragically, many of the Robots that have been sold to ’Mom & Dad’ traders, have done little to improve their bottom line, in fact, many of the ones we have tested would have sent your account crashing to oblivion. They were bloody disasters! The sales claims were wonderful, but all based on historical charts (backtesting) never on real time trading accounts. Downloadable Historical charts are never 100% accurate, which also means claims are hard to verify, so true testing has to be done on a Demo account over the longest period possible to get any indication of real performance.
But there are a few which have produced very encouraging results, worthy of testing on a trading account.
We currently trade using 2 different EAs: Forex MegaDroid and FapTurbo.
Megadroid has consistently produced profitable trades and has been returning around 12% per month. This is on a restricted risk setting of 20%, which is tighter than the 30% recommended by the creators. We just don’t feel comfortable with a risk level as high as 30%. This still means we will grow our account significantly over a 12 month trading period and that’s got to be a good for anyone.
When we started trading with FapTurbo the results were dissappointment, though this was due more to our Broker than the software. At the time our broker was not an ECN broker, so spreads varied considerably and were often outside the FapTurbo trading parameters. When the spread is 2 – 3 FapTurbo trades profitably, but being a scalper, the trade profits are small and it needs to trade frequently to have a significant effect on any account.
After about 6 months of frustration our broker bacame an ECN facility and trading with FapTurbo improved, but was still not as good as it should have been. We then found the cause, and this is very relevant to anyone outside the US. Being Australian and using an Australian broker, we set up our account in Aus$, only natural, no problems with conversions etc if we wanted to withdraw some funds. BAD MOVE!!! This meant that FapTurbo had to re-calculate the currency and it ground to a halt. When we changed our account to US$ the trading frequency changed significantly, as did profits… they were up, big time!
Of the other Forex Robots we have investigated, most will cut your account to shreads. Some of the hyped ones are simply re-packaged free EAs, presented as the latest and greatest, but the only money they make is for their vendor. When you find they have problems, there is no support and the vendor has vanished with your money, so where Forex Robots are concerned, be very cautious. Don’t jump in on the latest and greatest, check it out very thouroughly first before hitting the buy button.
If you do buy a Forex Robot, have a look at Forex Tester, and consider running some tests over a much longer period, it could well save your trading account!
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